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Monday, December 5, 2011

Entergy To Merge Elec Trans Biz With ITC Holdings Corp

Entergy Corporation plans to spin off its electric-transmission business and merge the operation with ITC Holdings Corp. to increase its financial flexibility and to protect its credit quality. Entergy's electric-transmission business consists of about 15,700 miles of interconnected transmission lines in the Mid-South.

Entergy has been shaping a new strategy after credit-market turmoil and regulatory pushback led it to back off plans to spin off five of its nuclear plants in April 2010. Meanwhile, it has been fighting with regulators over the fate of a nuclear plant in Vermont and another one in New York.

Under the agreement, Entergy will separate its electric-transmission business into a newly formed entity, Mid South TransCo LLC. Mid South TransCo will then merge with a unit of ITC in an all-stock, Reverse Morris Trust transaction, resulting in Entergy shareholders holding 50.1% of the combined company and existing ITC shareholders owning the remaining 49.9%.

Entergy expects to receive gross cash proceeds of about $1.78 billion from debt incurred in connection with the transaction, and this debt will be assumed by ITC at the close of the merger. ITC, the nation's largest independent electric-transmission company, also plans to issue about $700 million of unsecured debt.

By combining these businesses, they will significantly enhance the scale of their operations and financial resources as they continue to invest in electric transmission infrastructure for the benefit of customers, resulting in improved reliability, reduced system congestion and greater access to competitive energy markets.

Entergy plans to use most of the cash proceeds to retire debt. Completion of the transaction is expected in 2013. After the close, ITC's board will appoint two new independent directors. ITC's management team will remain intact for the combined business, but will be supplemented with key leadership personnel from Entergy's transmission business to help ensure a successful integration. About 750 current Entergy positions will be integrated into ITC, which will maintain a regional headquarters in Jackson, Miss. ITC's corporate headquarters are located in Novi, Michigan. (WSJ, 12/5/2011)